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First-time homebuyer--frugal ideas?

Hi, I am a 27-year-old girl from western Massachusetts. I lived with my mom until age 23, at which point I moved in with a family I had become acquainted with. My former housemates were great and we got along very well, for the most part, for close to three years.

Unfortunately, my former housemates fell on very hard times financially and ended up having to move to a low-income housing situation, and couldn't take me too. I started renting a house with a couple of other girls close to my age.

Unfortunately, my current roommates and I really don't get along. They're nice girls personally but we have a lot of issues in living together and just can't co-exist well. I don't even feel comfortable in what's supposed to be my home.

I've maintained a steady job in the area for 3.5+ years and make okay money, but I know I can't afford the high rents in the area. I've come to the realization that I would like to purchase my own home, to give me more stability and not worry about jumping from roommates to roommates hoping something will come together.

I've looked into the "tiny house" movement and find it exciting and interesting, but I understand that there are zoning nightmares involved. I've been exploring many "alternative" or "frugal" housing arrangements, but I'm concerned about what is legal, reasonable, and of course frugal.

I'm wary of financial decisions because a couple years ago I traded in my old car for a newer one. The car (I still have it ) is okay and I can make the payments, but I ended up in an upside-down loan and I really regretted it. I wish I had done something much cheaper, like trying to pay cash for an older car or something.

This is my first owned home and my heart is set on VERY modest and VERY frugal (while still legal and not a rules-and-regs horror story). I'm not sure how to proceed.

My mother and her boyfriend are very supportive of me and helping me with the process. My mother is a homeowner and a former real estate broker, also, so she knows a lot about this process.

Some or many of you on the forums probably are homeowners and have reasonable advice, thoughts, anecdotes, etc. I want to invest in a home but not wind up in way too far over my head.
Thanks for listening!

Re: First-time homebuyer--frugal ideas?

I'm not sure what it's like where you are, geographically. We live in Michigan and home prices are very reasonable here right now. A year and a half ago we bought a small, one-bedroom home that had been completely updated in 2004 for $17,000. We looked for 5-6 months prior to buying. It took that much time to get to where we felt we knew the market well enough to be able to determine the true value of the homes we were looking at, and to understand the dynamics of the neighborhoods where we were looking.

My advice to you is to live in the least expensive neighborhood where you feel safe. Some folks will say buy the cheapest house on the best street you can afford, but then you have to keep in mind that you may then feel like you need to keep up with the Joneses. We live among working-class people. There's no expectation to have a perfectly manicured lawn. People keep their yards neat, but no pressure to have a million Christmas lights up to out-do the next guy. Nobody looks down their nose if you change your oil in the driveway.

If you're handy, or if you know handy people, you can look for a fixer-upper. This will save you some money at the outset, but keep in mind that you'll eventually have other expenses related to the fixing-up, down the road.

Wherever you end up -- get to know your neighbors early. Learn who has the longest ladder, who has the power washer, who can help you get your lawnmower started. Help them out when you can, as well.

Best of luck on this journey! I'm sure you'll get some great ideas from the others here!

Re: First-time homebuyer--frugal ideas?

This is very exciting! I couldn't tell from your post if you are saving up to pay cash or are going to qualify for a loan/mortgage.

First, I would make a budget. See what your income versus your monthly expenses are. You have to be very comfortable with your financial situation as a lender will say you are qualified for more money than probably is necessary. Know what you can spend each month for your loan, utilities, taxes, insurance and repairs. Figure out if this is something you can do on your own. Learn what property tax rates are for an average home in your area and divide by 12. That is part of your monthly payment. Learn what type of home insurance you need and the average cost. Divide by 12 for a monthly amount. It adds up fast!

Next, physically and in person, talk to a bank loan officer if you are getting a loan. Check online for interest rates. Talk to more than one bank. Find out what you can qualify for in terms of a loan. Remember, your monthly loan payment should be no more than about 30% of your take home pay. For my husband and me, we have it closer to 22% for the mortgage as that is what is comfortable for us (and we live in a lower cost of living state so homes are reasonable).

Third, look for a starter home in an area that appeals to you in terms of convenience to your employment, family, safety, recreation, shops, etc. You said your mom was a broker? This may be a good time to get ideas from a real estate professional. Look online at homes but also go and visit several in person so you can get an idea of what $x buys and you can physically see the neighborhood and structure. Pictures can be deceiving! Online it may say "close to shops" but that may mean a 5 minute drive but a 25 minute walk. Or it may say 2 spacious bedrooms but in reality, one of them is teeny tiny!

Last, understand what home ownership means. Are you a person that wants to do yard work or mow the lawn? Shovel snow? Deal with security/garbage service/maintenance? If no, then maybe a condo or townhome with an association fee that covers this stuff may be better for you. Do you like to paint, sand, scrape, clean, replace, lift, haul, work with electricity/plumbing, etc? If yes, a fixer-upper may be perfect. If not, then a newer home may be better.

This is a great time to buy a home, especially in some areas of the country. I love being a homeowner and started out with a starter home and am now in our family's long term home. As long as you are prepared, you will be in a good position to become a home-owner! Good luck!

Re: First-time homebuyer--frugal ideas?

I am in SE Vermont so not to far from you. One thing that worked for us and our DS was to buy a two family house. The rent can often make your house payment. If you can find the right house, then later it can become a single family house. Good Luck with your house hunting. I would go get preapproved for a mortgage. That process will show you how much you can afford. Then when you find the perfect house, you will be ready to buy. Please join in here with more post and keep us updated on the house hunt, Babs

Re: First-time homebuyer--frugal ideas?

MamaJ, thanks for your advice! I'm not especially handy myself but I do know some people who are. I really like the sound of your neighborhood--
I wouldn't mind being among working-class types like myself.
A fixer-upper might be a good option for me. As I start to invest in the property if I go that route, I'll have to be mindful of the repair expenses.
Thanks again!

Re: First-time homebuyer--frugal ideas?

Pax - you have received very good advice from MamaJ & Babs. We purchased a modest townhouse 25 years ago and have never regretted staying instead of upgrading to a larger house as our family grew. We were able to pay off our mortgage within 10 years. We also later purchased a fixer upper 4-plex that our DS & DIL live in. They manage it for us for a reduced rent. Their are some risks with renting/tenants, but overall this has worked well for us.

A couple of words of caution if you are looking for a fixer upper:

Cosmetic things like exterior/interior painting, tiling (small projects), minor drywall repairs, caulking/sealing, landscaping e.t.c are all doable if you are willing to work hard & acquire some new skills. So when you look at properties, if these things are the issue, then do the math (how much it will cost you to make the repairs even if you will do it over time) then make your offer based on that (asking or appraisal price minus cost of repairs equals price you offer). If they refuse, walk away and keep looking. If you are patient something will come up in time. If you cave and up your offer, you will end up in a financial mess.

Major issues like electrical, plumbing, anything structural - wall, ceiling cracks/issues, foundation, roof, basement - all these things will cost you major $$$ to pay someone else to do. Even more $$ if you let someone who is not qualified try to do it and they mess up and it needs to be fixed by a professional.Also any real structural issues you will have issues with financing anyway.

Good luck - hope you find what you are looking for. Don't hesitiate to come back and ask more questions.

Re: First-time homebuyer--frugal ideas?

Mamasjob, thanks so much for all the great advice! I've put together a budget and have played around with mortgage calculators online. I've already talked to one bank, but I haven't committed to that one. I've visited a couple of home sites already but I have not made a decision.
You gave lots of helpful advice that I appreciate. Thanks! I look forward to continuing this process.

Re: First-time homebuyer--frugal ideas?

Save for escro prices this is the killer of all and make sure your home is secured why interest loan there is the killer of all try to wait alittle longer get a roomate if you have to and make sure all I mean all bills paid on time no messing with that why this shows those darn bankers you mean bussines and make sure you can get a home you cann afford like a fixer upper nothing wrong in that way you save even better just make sure you know what your doing period this house bussines is nothing to screw with I lost my home I had to sell and pay thebank off like right now this was 11 years ago and paying back tax on top of that now free and clear I never had to file sec. 8 bankruptcy 15 years later out of dept. and got rid of an x and I say good luck.

Feel
free to read the great frugal living tips, ideas and discussions
readers and community members have posted here. But if you'd like to
post something or start a discussion, please click here to go over to our new community site and create an account.

Feel
free to read the great frugal living tips, ideas and discussions
readers and community members have posted here. But if you'd like to
post something or start a discussion, please click here to go over to our new community site and create an account.

Dollar Stretcher, Inc. does not assume responsibility for advice given. All advice should be weighed against your own abilities and circumstances and applied accordingly. It is up to the reader to determine if advice is safe and suitable for his or her own situation.